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Award scheme in random trial contests

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  • Xu Tian

    (University of Science and Technology of China)

  • Gongbing Bi

    (University of Science and Technology of China)

Abstract

Innovation contests have been an important tool used in product research and development for companies. In the innovation contest literature, most papers assume the homogenous innovation contest model or the all-pay auction model. In this paper, we consider the random trial contest model and study the optimal award scheme. We show that, in this contest model, risk types of contestants play important roles in the award scheme, and the results are independent of the probability density function of the random shock. These generalize the work in literature. In addition, the risk aversion coefficient will decide the allocation manner in a multiple-winner scheme, i.e., a concave allocation manner or a convex allocation manner is optimal.

Suggested Citation

  • Xu Tian & Gongbing Bi, 2021. "Award scheme in random trial contests," Annals of Operations Research, Springer, vol. 302(1), pages 313-325, July.
    • Handle: RePEc:spr:annopr:v:302:y:2021:i:1:d:10.1007_s10479-021-04064-6
    DOI: 10.1007/s10479-021-04064-6
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    References listed on IDEAS

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    1. Benny Moldovanu & Aner Sela, 2001. "The Optimal Allocation of Prizes in Contests," American Economic Review, American Economic Association, vol. 91(3), pages 542-558, June.
    2. Laurence Ales & Soo-Haeng Cho & Ersin Körpeoğlu, 2017. "Optimal Award Scheme in Innovation Tournaments," Operations Research, INFORMS, vol. 65(3), pages 693-702, June.
    3. Rosen, Sherwin, 1986. "Prizes and Incentives in Elimination Tournaments," American Economic Review, American Economic Association, vol. 76(4), pages 701-715, September.
    4. Christian Terwiesch & Yi Xu, 2008. "Innovation Contests, Open Innovation, and Multiagent Problem Solving," Management Science, INFORMS, vol. 54(9), pages 1529-1543, September.
    5. Richard L. Fullerton & R. Preston McAfee, 1999. "Auctioning Entry into Tournaments," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 573-605, June.
    6. Ying-Ju Chen & Tinglong Dai & C. Gizem Korpeoglu & Ersin Körpeoğlu & Ozge Sahin & Christopher S. Tang & Shihong Xiao, 2020. "OM Forum—Innovative Online Platforms: Research Opportunities," Manufacturing & Service Operations Management, INFORMS, vol. 22(3), pages 430-445, May.
    7. Laurence Ales & Soo‐Haeng Cho & Ersin Körpeoğlu, 2021. "Innovation Tournaments with Multiple Contributors," Production and Operations Management, Production and Operations Management Society, vol. 30(6), pages 1772-1784, June.
    8. Ajay Kalra & Mengze Shi, 2001. "Designing Optimal Sales Contests: A Theoretical Perspective," Marketing Science, INFORMS, vol. 20(2), pages 170-193, December.
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    Cited by:

    1. Xu Tian & Gongbing Bi, 2022. "Multiplicative output form and its applications to problems in the homogenous innovation contest model," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 44(3), pages 709-732, September.

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